Extra money to insulate homes and a real terms increase in revenue investment for local authorities were amongst the amendments made to the Scottish budget yesterday as finance secretary Derek Mackay reached an agreement that will see the financial plan passed at all stages by the Scottish Parliament.

As part of an agreement with the Scottish Green Party, the budget will now include an additional £159.5 million of resource funding for councils while an extra £2m will be made available for insulating homes, fixing leaky windows and tackling fuel poverty.

Confirming the changes during the Stage 1 of the budget debate, Mr Mackay said: “As a parliament of minorities, we must work across the chamber to find compromise and consensus in order to give support, sustainability and stimulus to our economy and to our public services.

“This budget invests record amounts in our NHS, supports our efforts to improve attainment in our schools, invests in our economy with support for infrastructure, for broadband and for innovation, and supports our ambitions to tackle climate change.

“We are lifting the pay cap with a real terms increase in pay for the majority of public sector workers and we are supporting local services with a real terms increase for day to day spending and for long term investment, with an additional £170m going into local services, on top of the £10.5 billion already proposed.

“Our changes to tax ensure Scotland has a progressive tax system - with 70% of taxpayers paying less next year than they do currently and 55% paying less than they would across the rest of the UK - while businesses benefit from support for investment.

“The changes I have announced ensure that people in Scotland will benefit from the best deal for taxpayers in the whole of the UK.”

Patrick Harvie MSP, co-convener of the Scottish Greens, said: “Greens stand firmly with local communities and public sector workers affected by years of cuts and closures. Last year we stopped the cuts; this year we’ve pushed the government even further, and delivered a real-terms increase in funding, including a fair contribution towards the additional pressures councils are facing.”

COSLA said that the deal agreed between Derek Mackay and the Scottish Greens puts local government in an improved position over that of the proposed settlement in December. Adding that whilst it still does not remove the real financial challenges that local government is facing, the value of the essential services local government provides to our communities, is better recognised, it added.

COSLA’s resources spokesperson, Councillor Gail Macgregor, said: “First and foremost I am pleased that both Mr Mackay and the Scottish Green Party have listened to what COSLA has told them and that they have taken our concerns on board.

“We had two significant issues running side by side. Firstly, the need to maintain essential services for our communities and secondly the ability to make a fair offer to our valued workforce.

“COSLA, through our Fair Funding for essential services campaign, has been clear that Scottish Local Government should not remain the poor relation of the public sector.

“The reality of the situation is that the deal agreed today puts local government in a better situation than in December and credit to the Scottish Greens for listening to, and acting upon, the case put forward by COSLA.

“There remain serious financial challenges ahead in several areas, an obvious one being public sector pay.

“COSLA made no secret of the fact that our original allocation from the Scottish Government fell some way short of where local government as a sector ought to be and I am pleased that this has been recognised and acted upon.

“That is why today, I give credit where it is due.”

Derek Mackay said the budget takes steps to mitigate UK government cuts, increases funding for the NHS by £400m, invests in the expansion of early learning and childcare, delivers on our commitments to broadband, supports the building of 50,000 new homes, backs small businesses and innovation and provides essential funding for our frontline police and fire services.

The finance secretary also confirmed he will extend the Scottish Government’s commitments on public sector pay to ensure all public sector employees earning up to £36,500 receive a minimum 3% pay increase - meaning 75% of public sector workers, including NHS staff, will benefit from an inflationary pay rise.

And following discussions with Shetland and Orkney Island Councils, funding of £10.5m will be made available to support inter-island ferry services in 2018-19 - with talks continuing on a long term solution.

Investment in Low Carbon infrastructure – which is already increasing from 21% of planned infrastructure investment in 2017-18 to 29% in 2018-19 – will continue to increase in each year of the parliament, with additional support made available this year for home energy efficiency, the exploration of new local rail services and the delivery of marine protected areas.

In addition, Mr Mackay confirmed that, following publication of the Scottish Government’s tax proposals in December, he would take steps to remove an anomaly that meant some higher rate tax payers saw their bills fall while others on slightly lower incomes saw a rise, due in part to changes in the personal allowance.

As a result, while 70% of taxpayers will continue to pay less next year than they currently do, 55% will pay less than they would elsewhere in the UK. All those earning above the new Higher Rate Threshold of £43,430, a 1% increase on the 2017-18 threshold, will see a modest increase in income tax. This distinct income tax policy will raise around £55m and support an additional £420m of investment in the Scottish budget.